"The sublease market is really a mixed blessing," Magnaghi says. "Rates may be lower, but there's a higher risk for everyone involved. And as involved as primary leases are today -- it's nothing for primary lease documentation to be inches thick -- the sublease is often an even more complex arrangement.
Moreover, hundreds more businesses that could face closure for lack of reinvestment in the coming months, he says. There are many new buildings under construction that are nearing completion, and a serious amount of true vacant space for which to account.
Currently, there is a great deal of sublease space from which to choose, if that's the direction a company decides to take to either gain something from otherwise "empty" space, or reduce its overhead via relocation to facilities with lower rent.
Indeed, the amount of sublease space available in some areas is five times what was available at this time last year. "In certain local submarkets, such as University Towne Center, sublease space accounts for as much as 50 percent of inventory of available space -- quite a staggering statistic," he says.
In the greater Sorrento Mesa area, one-third of vacant space is available for sublease. What's even more astounding is another 230,000 sf will be coming on line in the next few months, which could push the vacancy rate substantially higher, Magnaghi says.
Subleasing is inherently complex. Like all things, it has its pros and cons, which need to be weighed to determine the best and fairest result for all parties.
Some sublease spaces are going for 20% to 30% less than the rates as seen directly from landlords, he says.
"In one particularly recent case, I represented a tenant in a sublease where the rent was a mere 60% of the amount the original tenant was paying," he says.
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